World's top auto market keeps expanding

17:01, January 23, 2010      

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Shen Lu just bought herself a red Mazda 3 as a new year present.

"It looks beautiful and has large space. I bought it to replace my old car, a small Chery QQ," said the 27-year-old IT practitioner.

"Cars with displacement of 1.6 liters, like the Mazda 3, are cheaper with reduced purchase tax," she added.

Shen's Mazda is one part of the mushrooming auto fleet that expands by 1,500 new vehicles every day in Beijing, a city that already has 5.7 million drivers and over four million automobiles.

The young white collar represents a consumer group that is pushing China, the newly-crowned world's top auto maker and market, to become a even larger auto market in the coming years.

China's auto sales rose 46.15 percent year on year to 13.64 million units last year, and output went up 48.3 percent to 13.79 million units in the same period, according to data from the China Association of Automobile Manufacturers.


Shen Lu can still remember how she envied her classmates whose families had cars when she was still a school girl, and now she had already bought her second car.

"Car has become a part of my life," she said.

"It is more convenient to go shopping or go out on picnics with a car. Most of my friends have cars or are planning to buy one," she explained.

To some urban Chinese, especially the young white collars, cars were no longer luxuries, but commonplace consumer goods, said Xie Liang, a senior editor of an auto magazine in Beijing.

"In China, it has become easier for people to find vehicles to their taste, and they are quick to decide," he said.

Lin Meiying, an accountant who worked in Hangzhou, southeastern China, said it only took her a month from planing to actually buy a car, a Mitsubishi Lancer.

"It (buying a car) is not a small expense, but to buy one is not a very big deal nowadays," she said.

The thriving auto market is seen as a result of an increase income and relatively stable prices of auto vehicles, said Xie.

"Urbanization and favorable tax policies on cars also contributed to the booming," he said.

To spur the use of clean and fuel-efficient cars, the government cut the purchase tax to 5 percent on vehicles with a displacement of less than 1.6 liters last year. The tax cut incentive has been extended to this year, with purchase tax being raised to 7.5 percent.

According to Jia Xinguang, an independent auto industry analyst, to follow the fashion was also a reason that more and more young people bought cars.

"These young people like fancy looking, cheap cars that look like racers or SUVs. For some of them, to look fashionable is the main reason of purchase," he said.

"And more parents, who might not be able to afford a car at a early age, are willing to buy cars for their children as gifts," Jia said.


Another notable phenomenon in China's expanding auto market is that China's rural residents have begun to cast their eyes on cars.

According to the Foton Chinese Index for Mobility of 2009, an annual survey jointly conducted by the Beijing-based Beiqi Foton Motor Co Ltd and Horizon Research Group and aimed at offering an insight into Chinese people's mobility, rural demands for cars increased.

According to the survey, 12.4 percent of interviewees in small towns and 11.5 percent of interviewed villagers have expressed interests in buying a car.

Last year, China had started to subsidize vehicle buyers in rural areas with 10 percent of price of the vehicle.

Boosted by the stimulus policy, sales of light truck, which are widely used in rural areas, increased by 17.35 percent to 1.13 million units year on year in the third quarter last year, according to the China Automobile Dealers Association.

According to the Foton Chinese Index for Mobility, of all the farmer interviewees that planned to buy a car in the next year, 17.4 percent of them had moved up their plans because of the subsidizing program, while 11.5 percent of them had decided to have cars because of the program.

Data from the Ministry of Finance showed that by the end of 2009, China had provided 8.7 billion yuan (about 1.27 billion U.S.dollars) of subsidies to rural auto purchases, covering 5.83 million auto vehicles.

Shao Qihui, honorary chairman of the Society of Automotive Engineers of China, said that in 2009, vehicles in rural areas could only meet 30 percent of the total demand for rural transportation.

Relatively low income in the rural areas compared with cities hampered rural vehicle consumption, and trucks, tractors and even horse carts were used to for passenger transport in the countryside, he said.

"However, as inhabitants in rural areas accounted for almost three fourths of the country's population, the potential of the rural market can not be overlooked," he said.


New energy cars has also brought fresh impetus to China's auto market with cheaper prices and low emission.

The Foton Chinese Index for Mobility showed that 23 percent of the interviewees were willing to buy automobiles of hybrid power, the figure for electric vehicles was 10.1 percent.

Up to 36.5 percent hope that the government would subsidize new energy car purchases, said the survey.

Jia said that the government should promote new energy cars, and develop low speed ones.

"In cities, a car with an average speed of about 25 miles per hour is enough for people to go back and forth between homes and work places," Jia said.

He is quite confident in the future development of the new energy car market. "Low speed new energy cars are cheap and power saving. They are environmental friendly and has huge market potential."

Source: Xinhua
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